Why have we got two extra types of charity?

A leading academic called the existing regulatory set-up 'a disaster' and has called for one complete charity register

Wills Memorial Building, University of Bristol: an exempt charity
Wills Memorial Building, University of Bristol: an exempt charity

In his final lecture as professor of charities at Sheffield Hallam University, Gareth Morgan took aim at one of the more glaring anomalies of charity regulation in England and Wales - exempt and excepted charities. The existing set-up, he declared, was "a disaster".

There are about 14,000 exempt charities, which have a primary regulator other than the Charity Commission: they include universities (except those in Wales and the Oxford, Cambridge and Durham University colleges), further education colleges, academy and free schools, sixth-form colleges and some of the larger museums.

Excepted charities differ again: there are 75,000, including churches of many denominations and charities with incomes below £5,000 a year. They are regulated by the commission but don't have to register or submit annual accounts to it.

The situation is more straightforward in Scotland, where all charities must register with the Office of the Scottish Charity Regulator, and Northern Ireland is in the process of implementing a similar regime.

Morgan argued that, without a complete register of charities, England and Wales could never have an effective system of charity regulation. But there are differing views about whether it would be better if all charities in England and Wales were brought under the commission's control.

Emma Knights, chief executive of the National Governors' Association, the membership body for governors of state-funded schools in England, thinks this would be "no bad thing" for academy schools, which are regulated by the Secretary of State for Education. "Academies are divorced from the rest of the charity sector, which means the best charity practices aren't necessarily well known by them," she says. For example, she says, there's a lack of understanding among academies - "perhaps even a naivety" - about conflicts of interest among trustees that Charity Commission oversight might help to cure.

"As long as you're not talking about dual regulation, which would be a bureaucratic nightmare, having the commission as the regulator instead of the Department for Education would probably be welcomed by academies as more straightforward," she says.

But in the case of universities, regulated by the Higher Education Funding Council for England, and further education colleges, regulated by the Secretary of State for Business, Innovation and Skills, a move to regulation by the commission might make the system more complicated, according to Smita Jamdar, education partner at the law firm Shakespeare Martineau.

"The Charity Commission is just not familiar with these organisations, so you run the risk they'll miss something, or get involved in something that is actually perfectly acceptable within the norms of the sector," she says.

Hefce has been very conscious of universities' charitable status, Jamdar says, and has built its regulatory regime around it, with reporting requirements similar to those of the commission and explanations in its funding agreements with universities of how to comply with charity law.


In the case of further education colleges, she says, reporting requirements are similarly charity-friendly, but "the secretary of state has done perilously little to show any interest" in colleges' charitable status. "Colleges comply with reporting, but whether they make decisions with their charitable status at heart is questionable," Jamdar says.

"A lot of colleges are merging," she says. "In many cases both colleges want to dissolve themselves and set up a new one rather than risk the merger being seen as a takeover. Dissolving both is more resource-intensive, so from a charity law point of view we're wasting money that could be spent on charitable objectives instead of on saving people's blushes."

Although she doubts commission regulation would solve that particular problem, Jamdar says it could help colleges see themselves through a more charitable prism.

Disagreement on churches

On churches, Morgan said in his speech that their compliance with and understanding of charity law was generally much weaker than in the rest of the sector. But Ian Theodoreson, chief finance officer of the Church of England governance group, disagrees strongly.

"We work quite hard in producing guidance for parishes about what's expected of them," he says. "Whether they read the guidance is another matter, but it's all in place. Church regulation is akin to charity law, and in some cases is more onerous."

He says there are about 10,000 excepted Church of England parishes and another 10,000 branches of other Christian denominations. "We're quite relaxed about the idea of registering," he says, pointing out that submitting accounts to the commission would not be a challenge because parishes are already required to produce accounts within four months of a financial year-end.

In the case of exempt charities, the Charities Act 2006 included a provision to add them to the register, but so far only those with incomes greater than £100,000 a year have been signed up. The deadline for the rest has been put back until 2021, which Morgan called "scandalous". He called for the process to be accelerated, but a spokeswoman for the commission, which has lost nearly half of its budget in the past five years, says it would be a "massive capacity issue".

Nicola Evans, senior associate at the law firm Bircham Dyson Bell, says: "It would be a hefty addition to the commission's workload and, given everything else that's going on at the moment, I'm not sure it's too high up on anyone's to-do list. If you were starting from scratch you probably wouldn't start from here, but it has to be a question of finding the best way forward with the resources available."

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